Principles of Auditing & Other Assurance Services (Irwin Accounting)
20th Edition
ISBN: 9780077729141
Author: Ray Whittington, Kurt Pany
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 3, Problem 34EOQ
To determine
Identify the appropriate answer that which is implied when a CPA signs the preparer’s declaration on a federal income tax return.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
When a CPA knows that a tax client has skimmed cash receipts and not reported the incomein the federal income tax return but signs the return as a CPA who prepared the return, theCPA has violated which of the following AICPA rules of conduct?a. The Confidential Client Information Rule.b. The Integrity and Objectivity Rule.c. The Independence Rule.d. The Accounting Principles Rule
Indicate whether the following statements are "True" or "False" regarding AICPA Statements on Standards for Tax Services.
a.
The Statements are enforceable standards of professional practice for AICPA members working in state or Federal tax practice.
b.
In preparing a return, a CPA must verify information furnished by the client or by third parties.
c.
A CPA should make a reasonable effort to obtain from the client, and provide, appropriate answers to all questions on a tax return before signing as preparer.
d.
The CPA should not take a questionable position based on the probabilities that the client's return will not be chosen by the IRS for audit.
e.
A CPA may prepare a tax return using estimates received from a taxpayer if it is impracticable to obtain exact data.
The main portion of an independent auditor’s work in expressing an opinion on financial statements consists of
a. Obtaining and examining sufficient appropriate evidence
b. Examining compliance with tax laws
c. Studying and evaluating internal control
d. Comparing client’s total accountabilities with its actual assets as of the end of the reporting period
Chapter 3 Solutions
Principles of Auditing & Other Assurance Services (Irwin Accounting)
Ch. 3 - What is meant by the term ethical dilemma?...Ch. 3 - What are the two major types of constraints on...Ch. 3 - Prob. 3RQCh. 3 - Prob. 4RQCh. 3 - Prob. 5RQCh. 3 - Prob. 6RQCh. 3 - Prob. 7RQCh. 3 - Bill Scott works as a manager in the Phoenix...Ch. 3 - Prob. 9RQCh. 3 - Prob. 10RQ
Ch. 3 - Prob. 11RQCh. 3 - Prob. 12RQCh. 3 - Prob. 13RQCh. 3 - Prob. 14RQCh. 3 - Prob. 15RQCh. 3 - Prob. 16RQCh. 3 - Prob. 17RQCh. 3 - Prob. 18RQCh. 3 - Prob. 19RQCh. 3 - Prob. 20RQCh. 3 - Prob. 21RQCh. 3 - Prob. 22RQCh. 3 - Prob. 23RQCh. 3 - Prob. 24RQCh. 3 - Prob. 25RQCh. 3 - Prob. 26RQCh. 3 - Prob. 27QRACh. 3 - Prob. 28QRACh. 3 - Prob. 29QRACh. 3 - Prob. 30QRACh. 3 - Prob. 31QRACh. 3 - Prob. 32QRACh. 3 - Ron Barber, CPA, is auditing the financial...Ch. 3 - Prob. 34AOQCh. 3 - Prob. 34BOQCh. 3 - Prob. 34COQCh. 3 - Prob. 34DOQCh. 3 - Prob. 34EOQCh. 3 - Prob. 34FOQCh. 3 - Prob. 34GOQCh. 3 - Prob. 34HOQCh. 3 - Prob. 34IOQCh. 3 - Prob. 34JOQCh. 3 - Prob. 34KOQCh. 3 - Prob. 34LOQCh. 3 - Prob. 35OQCh. 3 - Prob. 36OQCh. 3 - Prob. 37OQCh. 3 - Prob. 38OQCh. 3 - Prob. 39OQCh. 3 - Prob. 40OQCh. 3 - Prob. 41OQCh. 3 - Prob. 42OQCh. 3 - Gary Watson, a graduating business student at a...Ch. 3 - Prob. 44PCh. 3 - Prob. 45PCh. 3 - Prob. 46PCh. 3 - Prob. 47ITCCh. 3 - Prob. 48ITCCh. 3 - Prob. 49RDC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- A CPA – (a) may use a client’s estimate of dollar amounts in preparing a tax return only if the client provides a sworn affidavit stating that supporting documents are lost. (b) generally may use a client’s estimated amounts in preparing a tax return sub-ject to determining that the amounts are reasonable based on all known facts. (c) may use her / his own estimate of some dollar amount if the client’s estimate is deemed to be either inadequate or excessive. (d) may never under any circumstances put an estimated amount on a client’s tax return and in fact would risk (i) losing her / his state CPA license and/or (ii) criminal sanctions imposed by the IRS for doing so.arrow_forwardWhen an auditor uses the work of an expert, who has the responsibility for arriving at an overall conclusion regarding the fair presentation of a client's financial statements? a) the auditor b) the expert c) the client's management d) the client's audit committeearrow_forwardExplain what is meant by determining the degree of correspondencebetween information and established criteria. What are the information and establishedcriteria for the audit of Jones Company’s tax return by an internal revenue agent? Whatare they for the audit of Jones Company’s financial statements by a CPA firm?arrow_forward
- Describe the action that an auditor should take if an attorneyrefuses to provide information that is within the attorney’s jurisdiction and may directlyaffect the fair presentation of the financial statements.arrow_forwardDescribe the nature of the evidence the internal revenue agentwill use in the audit of Jones Company’s tax return.arrow_forwardWhich of the following acts by a CPA would be most likely to be a violation of the AICPA Code of Professional Conduct? Select one: A “covered member” owns an immaterial amount of stock in an audit client. Accepting a fee in a tax matter that is contingent upon the result of an administrative proceeding. Assisting a client in preparing a financial forecast. Forming a professional corporation to practice as a CPA.arrow_forward
- why would an auditor ensure that all revenue-related disclosures are made in the financial statementsarrow_forwardAccording to the Code of Professional Conduct of the AICPA, for which type of service may a CPA receive a contingent fee? O Performing an audit of a financial statement. O Performing a review of a financial statement. O Performing an examination of a prospective financial statement. O Seeking a private letter ruling.arrow_forwardThe AICPA has issued standards for CPAs in tax practice, called Statements on Standards for Tax Services (SSTS). Download the Statement on Standards for Tax Services No. 1-7Links to an external site.. What does the SSTS say about a CPA relying on information supplied by the client (see SSTS #3)? Are estimates ever permitted to be used in preparing a tax return (see SSTS #4)?arrow_forward
- Which of the following professional services is an attestation engagement?(1) A consulting service engagement to provide computer-processing advice to a client.(2) An engagement to report on compliance with statutory requirements.(3) An income tax engagement to prepare federal and state tax returns.(4) The preparation of financial statements from a client’s financial records.arrow_forward4. Comment( ethical or unethical) on the following computations of the auditor's professional fee: a. 10% of the client's tax adjustment b. 10% of the client's audited net income c. waiving of professional fee 5. What is the primary objective of the audit engagement letter? Give two(2) possible reasons why the auditor should be initiating the audit engagement letter similar to pages 27-28 Why should the audit engagement letter be renewed periodically? 6. Luzon, Inc., a publicly held company wishes to engage J. Cruz, a CPA, to examine its financial statements. Luzon was generally pleased with the services provided by its prior CPA, Dizon, but though the audit work performed was too detailed and interfered excessively with Luzon's normal office routines, Cruz asked Luzon to inform Dizon of the decision to change auditors, but Dizon did not wish to do so. REQUIRED: Describe the three(3) kinds of written communications to be accomplished by the receiving accountant to the existing…arrow_forwardAn important task ¡n the audit of the revenue cycle is determining whether a client has appropriately recognized revenue. a. What is the five-step process that companies should use in recognizing revenue? Why might the auditor need to do additional research and consider additional criteria on revenue recognition? b. The following are situations in which the auditor will make decisions about the amount of revenue to be recognized. For each of the following scenarios, labeled (1) through (6): . Identify the key issues to address in determining whether or not revenue should he recognized. . Identify additional information the auditor may want to gather in making a decision on revenue recognition. . Based only on the information presented, develop a rationale for either the recognition or nonrecognition of revenue. 1. AOL sells software that is unique as a provider of Internet services. The software contract includes a service fee of $19.95 for up to 500 hours of Internet service each month. The minimum requirement is a one-year contract. The company proposes to immediately recognize 30% of the first-year’s contract as revenue from the sale of software and 70% as Internet services on a monthly basis as fees are collected from the customer. 2. Modis Manufacturing builds specialty packaging machinery for other manufacturers. All of the products are high end and range in sales price from $5 million to $25 million. A major customer is rebuilding one of its factories and has ordered three machines with total revenue for Modis of $45 million. The contracted date to complete the production was November, and the company met the contract dare. The customer acknowledges the contract and confirms the amount. However, because the factory is not yet complete, it has asked Modis to hold the products in the ware house as a courtesy until its building is complete. 3. Standish Stoneware has developed a new low-end line of baking products that will be sold directly to consumers and to low-end discount retailers. The company had previously sold high-end silverware products to specialty stores and has a track record of returned items for the high-end stores. The new products tend to have more defects, but the defects are not necessarily recognizable ¡n production. For example, they are more likely to crack when first used in baking. The company does not have a history of returns from these products, but because the products are new, it grants each customer the right to return the merchandise for a full refund or replacement within one year of purchase. 4. Omer Technologies is a high-growth company that sells electronic products to the custom copying business. It is an industry with high innovation, but Omer’s technology is basic. In order to achieve growth, management has empowered the sales staff to make special deals to increase sales in the fourth quarter of the year. The sales deals include a price break and an increased salesperson commission but not an extension of either the product warranty or the customer’s right to return the product. 5. Electric City is a new company that has the exclusive right to a new technology that saves municipalities a substantial amount of energy for large-scale lighting purposes (e.g., for ball fields, parking lots, and shop ping centers). The technology has been shown to be very cost effective in Europe. In order to get new customers to try the product, the sales force allows customers to try the product for up to six months to prove the amount of energy savings they will realize. The company is so confident that customers will buy the product that it allows this pilot-testing period. Revenue is recognized at the time the product is installed at the customer location, with a small provision made for potential returns. 6. Jackson Products decided to quit manufacturing a line of its products and outsourced the production. However, much of its manufacturing equipment could be used by other companies. In addition, it had over $5 million of new manufacturing equipment on order in a noncancelable deal. The company decided to become a sales representative to sell the new equipment ordered and its existing equipment. All of the sales were recorded as revenue.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub